Fake Tethers under fake bitcoins.
Tether

Why did $100 million in tethers disappear?

Some suspect the trail leads to the Bahamas

On Tuesday morning, the circulating supply of Tether’s token dropped to roughly 2.7 billion from 2.8 billion. An obscure Reddit post may give some clues as to what happened.

This marks the first serious drop in supply in since mid-July, when some 300 million tether were taken out of the market but by mid-August, around 400 million were added back. Each “tether” is allegedly backed by one dollar; thus the token trades at par with the U.S. dollar.

Tether WatchThe decrease in supply is increasing speculation that Tether is using Deltec Bank, based in The Bahamas, as the storage place for their U.S. dollar assets. Tether had been using Puerto Rico’s Noble Bank as its bank of choice but, as first reported by Modern Consensus, Noble is going through financial woes. Subsequent reporting by Bloomberg revealed the company is up for sale and Tether—along with sister company Bitfinex—are no longer Noble customers.

A possible relationship between Tether and Deltec came to light three weeks ago in a rather odd way. A Reddit post about a meetup in Amsterdam for VeChain (a supply chain blockchain platform) mentioned a presentation by someone from crypto merchant bank Cream. That person began talking about attorney Daniel Kelman, allegedly saying, “Dan actually works very closely with the Tether guys and he solved their problem, and he actually founded a bank to bank the Tether money, and he actually has a bank that we work with….”

In response, real estate investor Jackson Fu, one of two people believed to be involved in Cream, named the bank as Deltec. Posting under his handle, Chinacryptoinfo, Fu wrote that Kelman “negotiated on behalf of Tether to open a bank account there… The funds which is backing Tether is in deposit with Deltec Bank. How do I know? Because I went to Bahamas and visited Deltec. You can, too, make an appointment. It’s a private bank.”

Those posts were later deleted but screenshots are circulating social media.

One anonymous-but-vocal critic of Tether took to Twitter to shout his suspicions about what happened to the $100 million in decreased supply and Deltec.

Tether is the countercurrency in roughly half of all exchange trades on bitcoin. And things aren’t looking so bright for cryptocurrencies. As noted by Bloomberg’s Olga Kharif on Tuesday morning:

“Industry bellwether Bitcoin had seen its daily transaction volumes fall from an average of around 360,000 a day in late 2017 to just 230,000 in September 2018. Meanwhile, daily transaction values were down from more than $3.7 billion to less than $670 million in the same period, Juniper said in the study, The Future of Cryptocurrency: Bitcoin & Altcoin Trends & Challenges 2018-2023.”

Did Tether and Bitfinex’s management decide now is the perfect time to cash out or did their dollars go elsewhere? We won’t know for a long while.

Lawrence Lewitinn, CFA was the founding editor in chief of Modern Consensus. Disclosure: Lewitinn owns no cryptocurrencies in his portfolio.